FISH AND THE MARKET
September 26, 2008
In 1995, Alaska's halibut fisherman decided to privatize their fishery by dividing up the annual quota into "catch shares" that were owned, in perpetuity, by each fisherman. Today, the halibut season lasts eight months, up from three days, and the combined value of their quota has increased by 67 percent to $492 million, says the Economist.
Sadly, most of the rest of the world's fisheries are still embroiled in a damaging race for fish that is robbing the seas of their wealth. Yet, the powerful logic in favor of market-based mechanisms has been ignored, partly because the evidence has largely been anecdotal, says the Economist.
Now a study of the world's 121 fisheries managed by individual transferable quotas (ITQs), one form of market-based mechanism, has shown that they are dramatically healthier than the rest of the world's fisheries. The ITQ system halves the chance of a fishery collapsing:
- By giving fishermen a long-term interest in the health of the fishery, ITQs have transformed fishermen from rapacious predators into stewards and policemen of the resource.
- The tragedy of the commons is resolved when individuals own a defined (and guaranteed) share of a resource, a share that they can trade.
- This means that they can increase the amount of fish they catch not by using brute strength and fishing effort, but by buying additional shares or improving the fishery's health and hence increasing its overall size.
But ITQs, and other market mechanisms, are not a replacement for government regulation, and they will not work everywhere, says the Economist. Attempts to use ITQs in international waters have failed, because it is too easy to take fish because of weak regulations, and they will not work in slow-growing fisheries, where fishermen may make more money by fishing the stock to extinction than waiting for them to mature.
Nevertheless, in most of the world's fisheries, market mechanisms would create richer fishermen and more fish, says the Economist.
Source: Editorial, "Economies of Scale: Fish and the Market," The Economist, September 20, 2008.
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